AOL, Sony Discuss Columbia House

NEW YORK -- AOL Time Warner Inc. and Sony Corp. have restarted talks about selling Columbia House, their jointly owned music and video direct-marketing club, to Bertelsmann AG, parent of Columbia's main rival, BMG Direct, Wednesday's Wall Street Journal reported.

If completed, the deal would combine the No. 1 and No. 2 music clubs in the U.S., creating a direct-marketing powerhouse.

Under one scenario being discussed, Bertelsmann would pay cash for about 80% of Columbia House. One of the two Columbia House partners, probably AOL (AOL), would likely retain about 20% of the company so that Bertelsmann can be guaranteed a supply of video and music product, according to people familiar with the situation.

One industry executive with knowledge of the talks said the price for the stake could be between $500 million and $600 million, although it isn't clear if a price has been set.

The latest round of discussions, which follows a couple of other attempts to sell Columbia House to Bertelsmann over the past 18 months, could once again end without a deal. A major issue confronting all the companies is whether a deal can be crafted that could pass antitrust scrutiny, according to people familiar with the situation. All three companies involved appear to be extremely sensitive about the potential regulatory obstacles.

Representatives of Bertelsmann's eCommerce Group, AOL's Warner Music and Sony's (SNE) Sony Music all declined to comment.

Purchase of Columbia House would strengthen the German media conglomerate's growing presence in direct marketing of music. Aside from BMG Direct, Bertelsmann owns CDnow, an online music retailer. (Bertelsmann recently created a new umbrella in its eCommerce Group called BeMusic, which includes BMG Direct and CDnow.)

NEW YORK -- AOL Time Warner Inc. and Sony Corp. have restarted talks about selling Columbia House, their jointly owned music and video direct-marketing club, to Bertelsmann AG, parent of Columbia's main rival, BMG Direct, Wednesday's Wall Street Journal reported.

If completed, the deal would combine the No. 1 and No. 2 music clubs in the U.S., creating a direct-marketing powerhouse.

Under one scenario being discussed, Bertelsmann would pay cash for about 80% of Columbia House. One of the two Columbia House partners, probably AOL (AOL), would likely retain about 20% of the company so that Bertelsmann can be guaranteed a supply of video and music product, according to people familiar with the situation.

One industry executive with knowledge of the talks said the price for the stake could be between $500 million and $600 million, although it isn't clear if a price has been set.

The latest round of discussions, which follows a couple of other attempts to sell Columbia House to Bertelsmann over the past 18 months, could once again end without a deal. A major issue confronting all the companies is whether a deal can be crafted that could pass antitrust scrutiny, according to people familiar with the situation. All three companies involved appear to be extremely sensitive about the potential regulatory obstacles.

Representatives of Bertelsmann's eCommerce Group, AOL's Warner Music and Sony's (SNE) Sony Music all declined to comment.

Purchase of Columbia House would strengthen the German media conglomerate's growing presence in direct marketing of music. Aside from BMG Direct, Bertelsmann owns CDnow, an online music retailer. (Bertelsmann recently created a new umbrella in its eCommerce Group called BeMusic, which includes BMG Direct and CDnow.)